Let Appraisal Quest Co. (805) 469-3088 help you decide if you can cancel your PMI
A 20% down payment is typically accepted when getting a mortgage. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value changeson the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they acquire the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.
It can take many years to get to the point where the principal is just 20% of the initial amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict plummeting home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things calmed down.
The toughest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At Appraisal Quest Co. (805) 469-3088, we know when property values have risen or declined. We're experts at recognizing value trends in Camarillo, Ventura County and surrounding areas. When faced with data from an appraiser, the mortgage company will often remove the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: